In response to the invasion of Ukraine, Western countries want to tighten sanctions against Moscow. A ban on the import of Russian gas and oil is under study, but there is no unanimous support at this stage.
The United States and the European Union want to increase pressure on Moscow. Western countries have been discussing new sanctions against Russia for several days in response to the invasion of Ukraine. An embargo on Russian gas and oil, unthinkable just a few days ago, is no longer completely out of the question.
· Who is for, who is against?
Under increasing pressure from Congress, which is preparing a draft to this effect, the Biden administration is pushing the Europeans to introduce a real embargo prohibiting the import of Russian oil and gas. On Monday, the issue was raised during a video conference between Joe Biden, Emmanuel Macron, German Chancellor Olaf Scholz and British Prime Minister Boris Johnson. Not being unanimous at this stage.
It must be said that the consequences of such a measure would be much more detrimental for European countries, especially those dependent, albeit to varying degrees, on Russian hydrocarbons, than for the United States.
In their respective press releases issued after talks between the four leaders, France and Britain announced their readiness to “increase sanctions” and “increase pressure” on Russia, without mentioning, however, the threat of an energy embargo. On the other hand, Germany, highly dependent on Russian gas, did not mention possible new sanctions. On the eve of Olaf Scholz, he repeatedly reminded that the import of fossil fuels from Russia is “necessary” for the “daily life of citizens” in Europe.
In an effort not to disturb more than necessary the almost perfect unity demonstrated so far by the Western countries, the White House is procrastinating. But he does not rule out unilateral actions, due to the inability to negotiate with the Europeans. However, Joe Biden “has not made a decision at this stage,” a spokeswoman for the American chief executive, Jen Psaki, assured on Monday.
For her part, Agnès Pannier-Runashe wanted to send a message to the United States on Tuesday:
“It is a bit easy to promote sanctions that will only apply on one continent and will not harm another continent,” the Minister Delegate in charge of industry told BFM Business, adding that his task is to “support European solidarity.” .
The entourage of Ecological Transition Minister Barbara Pompili, for their part, indicated that France “will decide in due time whether (it) will follow the United States, but in any case it will be a unified response” by Europe. “Europe will remain united, coherent and coordinated for any type of solution,” we insisted. “We understand the American position,” but “they don’t have the same energy situation as we do,” the source emphasized once again.
· Can Europe do without Russian gas and oil?
In 2021, energy products accounted for 62% of EU imports from Russia. Thus, Moscow provides 20% of Europe’s need for crude oil and 40% of gas needs. By comparison, Russian oil accounts for only 3% of US imports.
However, there are significant differences in Europe. Russian oil, for example, accounts for only 8% of UK imports, versus 9% for France and almost 42% for Germany. Moscow also supplies 55% of the natural gas imported across the Rhine, compared to 17% in France.
Faced with heavy dependence on Russia, Berlin on Sunday opposed a ban on gas, oil and coal imports from Russia. “It is useless if after three weeks we find that there is only a few days of electricity left in Germany, and therefore we must lift these sanctions,” explained Annalena Burbock, head of diplomacy.
“We are willing to pay a very, very high economic price,” but “if the lights go out tomorrow in Germany or Europe, it won’t stop the tanks,” she added.
· What are the implications for Russia?
The export of hydrocarbons is of great importance for the Russian economy. Oil and gas flows account for almost half of its exports and more than 15% of the country’s GDP.
In particular, gas generated $50 billion in revenue for Russia last year, compared to $110 billion for crude oil and $70 billion for petroleum products.
· How does Russia react to the threat from the West?
On Monday, Russia warned of “catastrophic consequences” for the oil market if the embargo was imposed. “It is impossible to quickly replace the volumes of Russian oil on the European market, it will take more than a year, and it will become much more expensive for European consumers,” Russian Deputy Prime Minister Alexander Novak warned, referring to a barrel of “more than $300” if Western countries carry out their threat.
Moscow has also threatened to cut off supplies from its Nord Stream 1 gas pipeline to Germany in the event of new Western sanctions:
“In connection with unfounded accusations against Russia in connection with the energy crisis in Europe and the imposition of a ban on Nord Stream 2, we have every right to take the appropriate decision and impose an embargo on gas supplies via the Nord Stream 1 gas pipeline. Alexander Novak said
· What are the alternatives for Europe?
Faced with the scale of the crisis with Russia, Europe is already looking to diversify gas supplies for next winter. In particular, 27 countries should get more out of their other suppliers than the US, Canada, Norway, Algeria, or even Qatar.
The problem is that there is nothing to suggest that the offer will be enough to compensate for a possible cut in Russian gas supplies to Europe. Moreover, a study by think tank Bruegel estimates that the EU “would have to cut its demand by at least 10-15%” if it decided to go without Russian gas, even if it increased its imports from Russia. country.
Another problem: the lack of regasification terminals on the continent risks limiting the import of liquefied natural gas (LNG) from the US, Australia or Qatar. That is why Germany has announced the construction of two new terminals, which, however, are not to be put into operation until 2026.
Berlin is also considering postponing the closure of its three nuclear power plants, and Italy, also very dependent on Russia, does not rule out restarting coal-fired power plants. In France, Bruno Le Maire called for “paying much more attention to energy consumption”. Last week, the International Energy Agency assured that a 1°C decrease in house temperatures would save Europe about 10 billion cubic meters of gas a year, or just under 10% of Russian imports to Europe.
What are the implications for the markets?
The very prospect of an embargo on Russian oil by the US and Europe made markets especially nervous on Monday. Thus, a barrel of Brent oil from the North Sea approached $140 at the beginning of the session, after which it fell again. On Tuesday morning, it continued to rise above $125 against $104 a week ago.
The price of natural gas hit a new all-time high on the European market on Monday. Concerns about disruptions to Russian exports have temporarily pushed the market benchmark in Europe, the Dutch TTF, to €345 per megawatt hour (MWh).